June 14, 2007

• Congressional Overview — First Session of the 110th Congress

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Congressional Overview — First Session of the 110th Congress

The First Session of the 110th Congress is in the beginning stages of its annual appropriations process. Its eleven FY 2008 appropriations bills will fund the federal government through 2008. Either as a part of this process, or through stand-alone legislation, the Congress will also begin the reauthorization process of the Higher Education Act (HEA) in earnest.

The FY 2008 budget resolution has a budget reconciliation instruction included in that directs the House and Senate education committees to report reconciliation legislation to the Budget Committees that achieves a savings of at least $750 million over a ten-year period.

The House Committee has reported its bill, HR 2669 — The College Cost Reduction Act of 2007 — with changes to Part B — the FFELP — that propose to achieve $19 billion in savings, with $750 million earmarked for deficit reduction and the remainder earmarked for increasing funding for Title IV, Title III, and Title V HEA programs, as well as funding for new programs. The bill includes most of HR 5 — The College Student Relief Act, HR 472 — The College Affordability and Transparency Act, HR 1608/S 939 — The College Aid made EZ Act and The Financial Aid Form Simplification and Access Act, S 359 — The Student Debt Relief Act, and S 938 — The Accessing College through Comprehensive early Outreach and State Partnerships (ACCESS).

Specifically, the legislation proposes to:

• Reduce the lender Special Allowance to 1.19 percent, 1.79, and 2.09;
• Halve interest rates over five years from 6.8 percent to 3.4 percent, with the rate returning to 6.8 percent in 2013 (HR 5);
• Reduce lender reinsurance to 95 percent (100 percent for lender of last resort loans) (HR 5);
• Increase lender fee from .5 percent to 1 percent, except for small lenders (HR 5) and non-profit lenders not associated with for profit entities;
• Repeal Exceptional Performer program (HR 5);
• Reduce the collection retention for FFELP guarantors from 23 percent to 16 percent (S 511);
• Increase annual student loan maximums for third year and beyond students from $5,500 to $7,500 and aggregates from $23,000 to $30,500 for undergraduates and $65,500 to $73,000 for graduate students;
• Provide income-based repayment plans for hardship and poverty cases (S 359);
• Increase the annual Pell Grant to $5,200 over five years and expand eligibility (S 359);
• Provide new tuition assistance for students who become teachers in public schools located in high-poverty areas;
• Provide student loan forgiveness for certain public service workers and professionals;
• Establishes incentives for institutions and states to control tuition and includes requirements for the provision of consumer information, transparency, and accountability (HR 472);
• Establish a new challenge grant program to encourage partnerships among the federal and state governments and the private and philanthropic sectors to increase postsecondary education participation by underrepresented populations and first generation students (S 938).
• Require the Department of Education and the United States Treasury to conduct a pilot program on using a market-based auction system for determining lender interest rates and using the Internal Revenue Service to collect income contingent loans.

A proposed guarantor funding model developed by the NCHELP guarantors that is comprehensive and the product of the Voluntary Flexible Agreement program authorized under Section 428A of the HEA, may still be substituted for the guarantor provision in the bill that reduces collection retention to 16 percent. The amendment is being scored by the Congressional Budget Office and could not be delivered to the Committee in time to include it in the bill during the Committee mark-up on June 14th. If the model is revenue-neutral, it may be inserted into the bill as a floor amendment during consideration by the full House of representatives.

The rest of the HEA reauthorization will be taken up separately.

Using the reconciliation bill to enact the legislation allows the legislation to be "fast-tracked" by bypassing the normal legislative process of public hearings, multiple votes and debate, and the need for 60 votes (rather than 51 votes) for passage in the Senate.

With respect to FY 2008 appropriations for student financial aid, the House Appropriations Committee has passed its version of the FY 2008 appropriations act for Labor, Health and Human Services, and Education with increases for most Title IV, III, and V programs.

• Pell Grants — annual maximum increased from $4,310 to $4,700.
• SEOG — level funded at $770,933,000
• College Work-Study — increased from $980,354,000 to $980,492,000
• LEAP — level funded at $64,987,000
• TRIO — increased from $828,178,000 to $868,178,000
• GEAR UP — increased from $303,423,000 to $323,423,000
• HSIs — increased from $94,914,000 to $99,500,000
• HBCUs — increased from $238,095,000 to $249,500,000

The Senate Appropriations Committee is expected to follow the House Appropriations Committee's example.

In spite of the accelerated process described above, look for many more oversight hearings through the summer on specific topics related to the HEA reauthorization, Title IV, and alleged abuse in, and reform of, the federal and private student loan programs.

Of more important significance however, there will also be significant delays in getting non budgetary-related legislation to the House floor because of the delaying tactics being used by the minority to move the eleven FY 2008 appropriations bills forward in protest of the majority's insistence that the 30,000 funding earmarks submitted by Members to the Appropriations Committee not be included in the eleven bills until they go to conference committees later in the summer, and to delay passage of the bills in order to demonstrate that the new majority cannot get its appropriations work completed before the beginning of the 2008 fiscal year on October 1st. The first of the 11 bills, to fund the Department of Homeland Security, has been debated for three days due to over 100 amendments being filed and continuing requests for record votes on procedural motions.

To date the following major Higher Education Act reauthorization bills have been introduced.

HR 5/S 282 — College Student Relief Act — reduces interest rates for subsidized federal loans by 50 percent. The HR also reduces FFELP subsidies and reinsurance to offset the cost of the interest rate reductions.

HR 451/S 565 — Next Generation Hispanic-Serving Institutions Act — establishes a program of competitive grants to eligible HSIs that offer graduate degrees and authorizes appropriations to both the existing Title V program for four-year and two-year programs, and the proposed new program.

HR 472 — College Affordability and Transparency Act of 2007 — Directs the Commissioner of Education Statistics to redesign the College Opportunity On-Line (COOL) website to include postsecondary education data of greatest interest to students and families, and requires schools to control the increase of student cost to no more than twice the CPI.

HR 990/S 707 — Pell Grant Equity Act of 2007 — repeals Section 401(b) (3) of the HEA requiring tuition sensitivity in the awarding of Pell Grants to students for 2007-2008. The cost is offset by a reduction in the FFELP guarantor collection rate to 23 percent and 22 percent.

HR 1608/S 939 — College Aid Made EZ Act and the Financial Aid Form Simplification and Access Act — proposes to implement the federal Advisory Committee on Student Financial Assistance's recommendations to simplify the FAFSA by establishing a FAFSA-EZ form that reduces the FASFA by 50 percent; establish a "pre-FAFSA" to allow students and parents to apply for financial aid early; encourages ED to coordinate with the IRS and SSA to supplement the new FAFSA with tax information; and, improve on-line access to the FAFSA.

HR 1994 — Financial Aid Accountability and Transparency Act of 2007 — mirrors S 486/HR 890 in requiring increased disclosures by schools of their relationships with student loan providers and includes a code of ethics for schools to follow.

HR 2458/S 1501 — Universal Higher Education and Lifetime Learning Act — consolidates the Hope and Lifetime Learning tax credits and the tuition tax deduction into a single credit; expands the credit to more years of college and more expenses; increases the amount of the credit and expands it to higher income levels and is refundable for low income earners.

S 301 — Nontraditional Student Success Act — increases annual maximum Pell Grant award; allows for two Grants per award year; excludes EITC from need analysis; authorizes a Nontraditional Students Demonstration Program to test the effectiveness of providing expanded financial aid to less than half-time students; increases appropriations for TRIO and title V; reauthorizes and expands the Early Intervention and College Awareness program; increases the percentage of Lifetime learning income tax credit for higher education expenses and makes a portion refundable.

S 359 — Student Debt Relief Act — includes S 282; increases annual maximum Pell Grant program to $5,100 this year to $6,300 in 2011; establishes the Fair Payment Assurance Program which caps loan repayment at 15 percent of a borrower's income for low income borrowers; allows reconsolidation of loans; reduces FDLP origination fee to zero; extends tuition tax credit.

S 486/HR 890 — Student Loan Sunshine Act — establishes "transparency" in the student loan lending and marketing arena; requires reporting of any special arrangements between schools and lenders; requires reporting, and banning of certain, gifts more than $10, including travel, entertainment, and in-kind services; requires reporting and written policies concerning preferred lender lists; encourages borrowers to make full use of the federal student loan programs before taking out private alternative loans.

S 511 — Student Loan Bill of Rights — requires lenders to report loan information to credit bureaus; caps monthly payments to an amount based on a borrower's income and status; requires ED to conduct a study on interest rates and fees charged on private loans; caps the collection fees on defaulted loans to 7.5 percent for consolidated loans, 13.5 percent for rehabilitated loans, and 18 percent for other loans; requires ED to set a cap on the total amount that can be charged to a borrower of a federal student loan, as a percentage of the original loan balance.

S 572/HR 1010 — Student Aid Reward Act — proposes to establish a program whereby institutions will be encouraged to participate in the federal student loan program (FFELP or FDLP) that is most cost-effective for taxpayers; proposes to share the savings generated by the choice of the most cost-effective program between the institution and federal government on a 50-50 basis; the institution's share would be required to be used to supplement need-based grants; includes methodology to be used to assess the cost of the FFELP and FDLP.

S 938 — The Accessing College through Comprehensive Early Outreach and State Partnerships (ACCESS) — which propose to implement the federal Advisory Committee on Student Financial Assistance's recommendations to create a national public-private federal-state partnership to increase access and persistence through early assurances of student financial grant aid and academic support for low income students; create a comprehensive system of early information about financial aid eligibility; and, increasing access to need-based financial aid.

S 945 — proposes to make several changes to the way college textbooks and materials are marketed and sold to institutions and students.

S 1262 — Student Loan Accountability and Disclosure Reform Act — includes much of the disclosure requirements included in S 486/HR 890 and HR 1194 and expands prohibitions to guaranty agencies. Also includes a code of conduct for institutions and a prohibition against "preferred lender lists".

S 1400 — Student Information Means a Positive Loan Experience (SIMPLE) Act — extends the availability of extended student loan repayment plans to borrowers with $20,000 in debt; allows borrowers to pay only the interest on their debt for 2 years; requires lenders to provide repayment information on the impact of postponed payments; specifies details to be included in exit counseling.

S 1401 — Student Financial Aid Data Privacy Protection Act — strengthens the limitations on accessing the national Student Loan Data System and requires lenders and the Department of Education to better educate and inform borrowers about the sensitivity and use of their data.

At this time, the consensus is that the Senate HELP Committee will have before it a comprehensive HEA reauthorization bill that includes the above listed bills and will report the bill to the full Senate this summer. If for some reason this does not occur, the Committee will move on to move legislation to reauthorize the No Child Left Behind, Head Start, and Workforce Investment Acts. The House may not have a bill out of the Education and Labor Committee until late this year.

Copies of bills before the Congress can be accessed at thomas.loc.gov.

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